Gaming the Incentive System

Middle-market developments are the only kind of affordable housing that are profitable to build, leaving the types of projects Florida most needs — those for extremely low-income residents — underdeveloped. [Photo: Jason P. Smith]

The state makes developers who want to build affordable apartments in Florida jump through plenty of hoops. But the developers have more than mastered the game.

To apply for low-income housing tax credits and financing from the State Apartment Incentive Loan program (SAIL), developers submit lengthy applications to the Florida Housing Finance Corporation. They must answer hundreds of questions, ranging from whether area income levels dictate a need for the complex, to whether a proposed complex will be near bus stops and grocery stores, even down to whether the units will feature a microwave oven. Based on the answers, the housing finance corporation uses a point system to rank projects. It approves the ones with the highest scores.

Experienced developers have figured out how to get perfect scores. In fact, so many applications were receiving the same score that the housing finance corporation had to develop tie-breaking options, including a lottery. But that hasn’t worked out, either. Housing officials say that some developers now game the system by creating numerous identical “shell” applications to increase their chances of winning the lottery. This year, the housing finance corporation received nearly 300 applications, a record.

In Tampa, Harry S. Hedges, vice chairman of the Hillsborough County Finance Authority, wrote to the housing finance corporation complaining that the system is “skewed in favor of a few large developers and allocates resources based more on luck and manipulation” than on communities’ needs. The Florida Home Builders Association, too, criticized the process as an “insider game.” Patricia Stephenson, executive director of the Broward Alliance for Neighborhood Development, voiced another typical complaint when she said, “Non-profit, community-based developers find it increasingly difficult to access programs through this process. The ability of large developers to submit dozens of what are actually shell applications has eliminated any benefit the lottery process might have had.”

The housing finance corporation is revising its rules for the 2009 cycle of applications. Possible changes include increasing set-asides for non-profit developers and preservation projects and requiring local site plan and zoning approval before applications can be submitted.